The ERTC is a refundable payroll tax credit for salaries paid by an employer whose company is totally or partially suspended due to an order related to COVID-19 or who is experiencing a decrease of at least 10 percent in gross income compared to it. calendar quarter of the previous year. The ERTC was designed to encourage companies of all sizes to keep employees on their payroll during this difficult economic period. Therefore, eligible companies that didn't initially apply for their ERTC could do so until 2024, depending on when they originally filed or paid their business taxes.
However, if a self-employed person has staff on the payroll, they may qualify for the ERTC for salaries paid to other employees. The ERTC was designed to help small businesses that lost revenue due to the pandemic, but only a few businesses are eligible. The ARPA, for example, allows small employers who received a Paycheck Protection Program (PPP) loan to also apply for the ERTC. The IRS has also clarified that tips can be considered qualified wages for ERTC purposes, as long as they are Medicare salaries.
Business tax filers will need additional payroll data and other documents to file their quarterly returns with the ERTC. The ERTC is available for companies of all sizes: there is no limit to the number of employees, although it is easier for small businesses to take advantage of it. A financial professional can also help you ensure that you don't apply for the same payroll for both PPP and ERTC loan forgiveness. If you haven't yet applied for PPP loan forgiveness, consider applying for non-payroll expenses to maximize the salary you can use to apply for your ERTC.
But companies could only apply for a forgivable loan from the Paycheck Protection Program (PPP) or the ERTC on the original bill, which meant that only a few of them could use the credit. While the ERTC is a great tool to help struggling companies reduce their tax burden, it's still a bit difficult to take advantage of it. Eligible employers with fewer than 500 full-time employees can also request early payment from the ERTC using IRS Form 7200. Companies that wish to apply for the ERTC must report their total qualified salaries, as well as related health insurance costs, on their quarterly tax returns (Form 941 for most employers).
Since then, the ERTC has been expanded twice so that more struggling companies can use it to lower their federal tax bill. A company may be eligible for ERTC under this provision, even if its revenues increased during the corresponding quarter.